Let's say that a loaf of bread costs $2.00. Due to massive improvements in technology and productivity, bread producers begin producing bread rapidly and efficiently. All else equal, say bread prices decline to $1.00 per loaf.Now let's say that the government inflates the money supply and bread prices rise to $1.50 per loaf. In this case, inflation has caused prices to rise and consumers pay more for bread than otherwise. However, in absolute terms we measure an actual decline in bread prices - from $2.00 to $1.50.In other words, even though there was inflation, prices have declined in absolute terms. Prices have not gone up in nominal terms, but they have risen more than they would have otherwise (absent the inflation of the money supply). This is a crucial point because it illustrates the nature of inflation and points to why so many people misunderstand this critical concept. Inflation is not "increasing prices" as virtually every modern economist would define it. Inflationis an increase in the quantity of money above the increase in the quantity of precious metals. Prices will tend to increase due to inflation as the additional supply of money chases the same amount of goods. But, again, all this means is that prices tend to be higher than otherwise - it does not mean that prices must rise when measured in nominal terms. Inflation is destructive for many reasons. Therefore, it is crucial to determine when inflation is occuring to properly analyze and account for its likely effects. Today's empiricist economists and their colleagues in government, who do not understand the nature of inflation, will simply measure price aggregates. If prices are going up, they call it inflation. If prices are going down, they call it deflation. This completely misses the point because it ignores cause and effect. This leads them to ignore the disastrous impact of inflation as long as nominal prices are not rising rapidly. Or, it causes them to attribute healthy and wealth creating price declines to deflation, resulting in policies which act to further destroy wealth. This is a crime. Without inflation of the money supply, prices would be much lower. Price decreases due to increasing productivity, such as the price decreases observed in the computer industry, represent massive increases in real wealth to everyone. Real wages or purchasing power is simply how much work you have to do to in order to get what you want. If it takes a week to work for a loaf of bread you are poorer than if takes an hour of work to buy a loaf of bread. In effect, if prices remain "stable" or don't increase rapidly, the government stands back and says "see, we have done a good job at keeping inflation under control." However, in the absence of this inflation, prices would be much lower than otherwise. Furthermore, capital would not be misallocated as a result of investors chasing distorted nominal price increases. One of the ways inflation is destructive is by distorting prices signals, causing investors to allocate capital to areas of the economy that appear profitable but in fact are not. This clearly happened in the housing sector, where investors poured money into real estate development on the expectation that housing prices would never decline. In fact, long term increases in housing prices has generally created the illusion that housing is an investment asset when in reality, it is a depreciating consumer good - a point I analyzed here. Today, housing prices should be declining as investors liquidate positions in housing. Banks should decline in value as the value of their real estate portfolios are marked down. These price declines represent a healthy process of liquidation of the previously malinvested capital. Price declines signal to the market that this is an unprofitable area that has been over capitalized. The market is saying: "get out and put your money elsewhere." However, the government is doing everything in its power to stop this process. Why? Because price declines, rather than being seen as part of a curative recession, are equated to deflation which, according to modern economists, must be stopped at all costs. The Federal Reserve has propped up unprofitable banks with counterfeit money in hopes that the banks stay solvent and that real estate prices appreciate. The Federal Reserve has essentially removed over $1 trillion of mortage backed securities from the market and placed it on its balance sheet. Since the Federal Reserve has paid for these securities with counterfeit money, they have essentially redistributed the losses to everyone who holds wealth in dollars since they have done so through inflation. But "wait" says the modern economist. "Prices are not rapidly increasing in aggregate so there is no problem with inflation." Wrong. It is inflationary every time the government counterfeits money. This money, whether or not is causes nominal price increases, causes all the attendant effects of inflation by causing prices to remain higher than otherwise. These relatively higher prices, among other things, signal or cause investors to stay invested in real estate when they would otherwise liquidate. It is propping up unhealthy banks that need to be liquidated. More broadly, these relatively higher prices signal to investors that everything is ok when, in fact, it is not. Recessions are a liquidation phase in which previously misallocated capital gets reinvested in more productive areas. Any distortions of prices caused by the government's intervention in the marketplace through both the creation of credit out of thin air or through more direct intervention, merely delays the inevitable. Rather than allowing a rapid liquidation and consequently, a rapid return to economic growth upon a sound foundation, these interventions encourage the disease to fester endlessly (see Japan from 1990 to the present), tying up much needed capital in failing enterprises, ultimately reducing the productivity of our economy and destroying real wealth.

I will return to this topic in my forthcoming post, Boom and Bust Part 4, in which I will analyze the Great Depression, and show why misinterpretation of this seminal economic event based on flawed philosophy, in part, leads to these flawed ideas.

Wednesday, April 28, 2010

Occasionally, I run across something where all I can say is "this is something out of Atlas Shrugged" except that even Rand could not have been cynical enough to dream it up. Evidently, the garbled mess of a PowerPoint slide above was created by our military to demonstrate the situation in Afghanistan and fittingly, is openly being mocked:

Its coloured charts, graphs and bullet-points are supposed to make the most incomprehensible data crystal clear.

But even the sharpest military minds in American were left baffled by this PowerPoint slide, a mind-boggling attempt to explain the situation in Afghanistan.

'When we understand that slide, we'll have won the war,' General Stanley McChrystal, the US and NATO force commander, remarked wryly when confronted by the sprawling spaghetti diagram in a briefing.

I agree with McChrystal, but not in the way he intends. We do not need to understand the actual content of the slide. We need to understand why the military would feel the need to create such a slide, i.e., the philosophy that gives rise to such an approach in the first place. If we understand that, we will indeed have won the war. Ironically, rather than searching for a more fundamental answer, the military myopically seems to blames the software itself for their confusion:

PowerPoint has become public enemy number one for many US officers who find themselves battling slide presentations rather than insurgents.

Some have gone as far as to declare all-out war on the software after the military command was over-run with mind-numbing 30-slide presentations.

To perfectly illustrate the complete inversion taking place, consider this quote from General James N. Mattis, the Joint Forces Commander:

'PowerPoint makes us stupid,' he growled at a military conference in North Carolina.

Due to these "growing concern[s] about the insidious spread of PowerPoint which has come to dominate the lives of many junior officers" [emphasis mine] such as the so-called "PowerPoint Rangers" who "spend hours slaving away on slides to illustrate every Afghan scenario", Brigadier General H.R. McMaster "went one step further and banned the presentation package when he led an offensive in Tal Afar, Iraq, in 2005" stating:

'It’s dangerous because it can create the illusion of understanding and the illusion of control,' he told the New York Times. 'Some problems in the world are not bullet-izable.

Note that we are implicitly offered two alternatives. On the one hand, we can attempt to synthesize an impossibly large set of disconnected facts in an effort to achieve a nebulous and virtually impossible goal: the command and control of a nation consisting largely of primitive warring religious tribes. On the other hand, recognizing the mind numbing difficulty of such a task, we can abandon any attempt at characterizing any situation (abandon the "illusion of control") and instead, operate by the seat of our pants, i.e., on the basis of whim.

I maintain that this instance is nothing but our old friend: rationalism vs. empiricism. Specifically, this whole situation echoes a previous post in which I analyzed Obama's 20 minute diatribe offered as an answer to a simple question. In that post, I claimed that Obama's philosophical pragmatism or his unwillingness and/or inability to think in principle leaves him in the mental state of animal, able only to offer a rambling litany of disconnected concretes.

No wonder he is frustrated. But his frustration is not moral or even political. It is epistemological. His mind, like the mind of most modern intellectuals, is wrecked. Without the ability to validly induce general concepts from observation, i.e., without the ability to reason, a man is reduced to the level of an animal. Such an approach would be like attempting to file papers without any categories.

So, what are the valid principles involved? Ultimately, we must establish the purpose of our foreign policy. On that basis, one can evaluate facts in a hierarchy and define intermediary goals to reach that end. The goal of America's foreign policy should be the protection and defense of America. To defend America, it might help to first, identify our enemies and second, identify whether these enemies constitute an immediate threat. This would help the military to battle and defeat our enemies rather than software.

To do this properly, one must understand and explain the ideology underlying the threat. Once a threat is defined, the goal must be to completely annihilate the enemy. For example, in Gifts from Heaven, The Meaning of the American Victory Over Japan, John Lewis "explains how America targeted, dismantled, and discredited this ideology, replacing it with the ideas, values, and institutions necessary for the establishment of a free society."

So, what exactly is America doing in Afghanistan? Why are we there? Who is the enemy and what is the goal? After the article, commenter (Harry from Eden Prarie, MN) characterized the problem eloquently:

This is what it looks like when you do not have a clear path to victory. Militaries around the world train for one goal, to defeat their enemy! The military is not a Nation Building tool, it is not a Global Police Force, it is not a Meals on Wheels branch. The Military should be given a clear goal and be left alone to accomplish that goal, just as it was done in WWII. History has shown us that "Mission Creep" will destroy morale and create a situation just as confusing as the PowerPoint slide in this article.

A while back, I quoted Sun Tzu's famed Art of War:

"When doing battle, seek a quick victory. A protracted battle will blunt weapons and dampen ardor. If troops lay siege to a walled city, their strength will be exhausted. If the army is exposed to a prolonged campaign, the nation's resources will not suffice. When weapons are blunted, and ardor dampened, strength exhausted, and resources depleted, the neighboring rulers will take advantage of these complications. Then even the wisest of counsels would not be able to avert the consequences that must ensue. Therefore, I have heard of military campaigns that were clumsy but swift, but I have never seen military campaigns that were skilled but protracted. No nation has ever benefited from protracted warfare."

These questions and these principles are not heeded for two related reasons. First, modern intellectuals reject the need or possibility of any principles with respect to foreign policy. They urge pragmatism, compromise or appeasement. Second, to assert American interests as the object of our foreign policy would be regarded as "selfish" and "arrogant", predicated on moral certainty of America's superiority - a notion in complete opposition to the Politically Correct precepts of multiculturalism which hold that morality is relative and one can not be sure that freedom and prosperity is preferable to slavery and ignorance.

PowerPoint is a software package that can help to simplify and essentialize a complex set of facts and theories. However, like the old adage that "guns don't kill people, people kill people", PowerPoint can not essentialize a disconnected hash of contradictory goals based on the self-sacrificial precepts of altruism and multiculturalism. When our politicians and military leaders understand the need for a principled foreign policy that asserts America's interests clearly and proudly and which proceeds to annihilate our enemies rather than kowtow to them, then and only then we will win the war.

Tuesday, April 27, 2010

Great essay by Clifford Asness debunking the absurd argument that Wall Street is solely to blame for the financial crisis (I debunked the Goldman fraud case here).

Stepping back, nowadays the popular narrative is that this economic crisis was caused by Wall Street and derivatives. It was not...Government was a prime culprit through the creation of disastrous GSEs, implementing politically correct social policy that warped the housing market, enacting land use restrictions in the bubble's worst epicenters and, of course, promoting 20+ years of too-big-too-fail when it was not at all needed, including pursuing exceptionally easy monetary policy for years after the "dot com" bubble....Government is using a disaster it had a primary role in creating as cover for further takeovers in a cloud of class warfare and lies......The reviled Goldman transactions did not cause, or even inflate, the real estate bubble, it just made one financial institution (Paulson) a bigger winner, and another a bigger loser. It was bet each wanted to make, and was by definition considered a fair one by each party at the time. How do we know this? Easy, it was voluntary. Now government wants to rewrite history and say that this type of fair bet caused all our problems, and they'll never bother us again if we just give them much more power, again. Do you believe them?

Monday, April 26, 2010

Reports are coming out that many SEC regulators were surfing alarming amounts of porn on the web over the past few years. After my post arguing that the SEC's case against Goldman is a flimsy publicity stunt, commenter Bart says:

For what it's worth I'd rather have them looking at porn then into my business.The net cost to the taxpayer is less then immoral enforcement policies of any regulatory agency.

I absolutely agree. In fact, I would like to officially propose a bill that would not only allow the SEC and other regulatory agencies the ability to surf porn all day, but would also extend to the entire Congress and the White House. The bill would provide funding for any and all porn sites, pay per view, as well as special viewing rooms to which they may go and lock themselves for extended periods. Imagine, no more health care bills, no more cap and trade, and no more financial regulations. No more spending increases, tax increases, earmarks, and congressional show trials. No more Barney Frank and Nancy Pelosi! For just a relatively small monthly fee, we could save trillions! The bill would be effective immediately.

Friday, April 23, 2010

In posts dating back to 2007, I have attempted to chronicle the philosophical and historical parallels between Christianity and the religion of environmentalism.

The specific parallels are quite interesting if not comical (phrases in quotes below are Michael Chrichton which can be found in above link). Here is a list if you are scoring at home:

Object of worship - Mother Earth or Gaia based on idea of intrinsic value, a value asserted on faith, i.e., apart from an objective standard based on man's life

Garden of Eden - pre-human earthly "paradise, a state of grace and unity with nature" - A bio-diverse Disney like eco-system where bunnies and lions frolic - it has the perfect temperature where, evidently, climate never changes

Fall and Original Sin - "fall from grace into a state of pollution"; man's inescapable nature requires use of the earth for survival - a condition known as "carbon footprint". "We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability"

Hell - Roast to death from Global Warming; Global apocalypse

Hereafter - so-called "future generations" or the beneficiaries of conservation

Communion - organic food

Idealize asceticism and sacrifice to God - renunciation of material possessions, technology, and comfort in favor of self-abnegation, downsizing, and recycling

Council of Nicaea - UN Intergovernmental Panel on Climate Change (IPCC) to settle official orthodoxy

I believe we now have a new parallel. I claim that the Climategate scandal parallels Theodosius I enforcement of the Nicene creed as the official religion of the Roman Empire leading to Theophilus burning the Library of Alexandria. In other words, given that official orthodoxy has been established, no need for any other pesky ideas to corrupt the Truth

Wednesday, April 21, 2010

In keeping with my tradition started last year on Exploit the Earth Day, I will recycle what I consider to be my favorite posts over the past year that deal with the anti-human religion of environmentalism. In Two Visions of a Sustainable Future the image of the Golden Gate Bridge and an image of a "specially designed composting pail" provide an opportunity to analyze the concept of "sustainability" and:

dramatize...two warring visions. One picture represents retrogression back to the life of an ignorant peasant sorting through trash and hiding seeds in bunkers passively awaiting a prophesied global apocalypse. The other is a picture from another part of San Francisco. The Golden Gate bridge represents reason, production, progress, and human happiness. It represents true creativity and more importantly, true sustainability - the kind that follows from a moral philosophy which holds man’s life as the standard of value.

In The Story of Stuff is The Stuff of Evil, I analyze an environmentalist propaganda film in detail, making the case that it should be banned from public schools on the grounds that its unscientific content violates the separation of church and state:

The fact that the film is factually inaccurate, philosophically false, and contains ideas beyond the conceptual level of children are grounds enough to prohibit this film in public schools. But, there is an even deeper reason why it should be prohibited. This film should be banned from public schools on the same grounds that any religious material is prohibited in government run schools. Just as intelligent design and creationism have properly been prohibited in schools on the grounds that teaching unscientific ideas would constitute a state sanctioned promotion of religion in violation of the First Amendment, this film and all environmentalist propaganda should also be prohibited.

In Written in Disgust of Vulgar Superstition, the Keats poem of the same title provides inspiration to answer why "the hysterical doomsday predictions of the modern environmental movement increasingly resemble the apocalyptic rantings of ancient mystics" and to answer the following:

What is the connection between biblical prophecy and modern scientific warnings about the end of civilization due to "global cooling", "global warming", or "climate change"? When observing the spectacularly absurd predictions of Malthus in 1798, lamentations about the end of discovery in the 1800's, or Newsweek's dire warnings of global cooling in the 1970's, and in light of overwhelming evidence that modern climate scientists do not fully grasp, uh, well, climate - how can someone like Peter Cosier claim that the "science is over" and that "urgent action" is required?

I will end this post the same way I did the above:

Modern civilization is founded upon the recognition and celebration of the power of the free and independent human mind to discover, create, and build. The Dark Ages and any dictatorship is a consequence of the rejection of the efficacy of the individual mind in favor of revelation and faith in mystic, supernatural forces conveyed to the ragged masses by self-anointed "experts" able to divine real Truth or the will of God. You choose which world you wish to live in.

I came across this poem which inspired this post and I think it eloquently captures the essence and suffocating sense of life of the mystic or in modern times - the crusadingenvironmental pseudo-scientist.

Written in Disgust of Vulgar Superstition

The church bells toll a melancholy round,Calling the people to some other prayers,Some other gloominess, more dreadful cares,More harkening to the sermon's horrid sound.Surely the mind of man is closely boundIn some black spell; seeing that each one tearsHimself from fireside joys, and Lydian airs,And converse high of those with glory crown'dStill, still they too, and I should feel a damp,-A chill as from a tomb, did I not knowThat they are dying like an outburnt lamp;That 'tis their sighing, wailing ere they goInto oblivion; - that fresh flowers will grow,And many glories of immortal stamp.

Saturday, April 17, 2010

With all the media coverage of the SEC's much publicized lawsuit against Goldman Sachs, can anyone actually tell me what they did that was fraudulent? From what I can gather, the SEC is essentially suing Goldman on the grounds that Goldman followed the investment banking business model, i.e., Goldman did what it and investment banks have done and are asked to do by clients for generations.

The main charge seems to revolve around the fact that a Goldman client, Paulson & Co., compiled a list of securities that he believed would go down in value and then, via Goldman, offered the list to another party, IKB and ACA, to take the other side of the transaction. And, GASP, Goldman didn't tell IKB and ACA that the all knowing, all seeing, omniscient demi-god Paulson was on the other side. According to this report:

Goldman Sachs created and sold CDOs linked to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicles, the Securities and Exchange Commission said today.

First, if you buy a security, someone MUST sell it to you. If you buy a stock because you think it will go up, guess what - someone is selling it to you because they believe it will go down. In other words, there are always two parties to each transaction. Human beings refer to this as "trading" or "investing."

Second, does a broker have an obligation to tell one party who is on the other side? When you buy a stock, chances are, the person who is selling it to you (through a broker) is selling it because he believes it is going down. Does the broker have an obligation to tell a stock buyer: "hey, you should know, the guy who is selling this stock is pretty smart and did a lot of due dilgence - are you really doubly sure you want to buy it from him?" A broker's job is to get traders on both sides of a transaction so they can make a commission. In Goldman's statement on the matter, they rightly point out:

The SEC’s complaint accuses the firm of fraud because it didn’t disclose to one party of the transaction who was on the other side of that transaction. As normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa. Goldman Sachs never represented to ACA that Paulson was going to be a long investor. [emphasis mine]

Why does it matter to the SEC that it was Paulson & Co.? It is offered as almost primafacie evidence against Goldman, that if the counter party had only known that it was the almighty Paulson on the other side, they would never have purchased it. First of all, as shown above, Goldman has no obligation to reveal this. Second, even if the perceived intelligence of the counterparty was a relevant issue, Paulson was not famous circa 2007. The fact is that Paulson became famous because he profited from being right about the housing market. If Paulson had been wrong, perhaps the SEC could have now sued ACA arguing that if Paulson had only known that the almighty ACA (almighty, because ACA would have gotten rich) he would not have done the trade! Third, the counterparty, ACA, had just as much ability as Paulson to evaluate this list of securities and they CHOSE to buy them believing they would go up in value. It doesn't matter if the list was provided by Paulson, Buffet, or Jesus Christ. The assets were the assets and IKB and ACA could have chosen not to take the trade. By definition, Paulson or any counterparty is "selecting" the trades they want by the very act of engaging in the transaction! Otherwise, they wouldn't do the transaction...

As an investor, if you want to bet against say the housing market you can go to an investment bank and they can create a security in which you take one side and another client, who believes the opposite, takes the other side. In essence, the investment bank facilitates a transaction between two willing parties. They get paid for brokering the transaction. THIS IS WHAT THEY DO. THAT IS THE BUSINESS MODEL. Quoting Goldman's statement:

In 2006, Paulson & Co. indicated its interest in positioning itself for a decline in housing prices. The firm structured a synthetic CDO through which Paulsonbenefitted from a decline in the value of the underlying securities. Those on the other side of the transaction, IKB and ACA Capital Management, the portfolio selection agent, would benefit from an increase in the value of the securities. ACA had a long established track record as a CDO manager, having 26 separate transactions before the transaction. Goldman Sachs retained a significant residual long risk position in the transaction.

Now, if Goldman distorted the nature of the true offering by, for example, telling customers they were buying grapefruit instead of subprimeCDO's, I could understand the case. I am not a legal expert, but to constitute fraud, I imagine that Goldman would have to knowingly and deliberately represent something they knew to be false. At the time, no one knew what the subprime market was going to do. Most people thought it would continue to flourish so investors bought these securities and other investors shorted them.

Should we be surprised that the SEC shows this level of ineptitude? Keep in mind, while the two aforementioned sophisticated investors were willingly entering into this trade, the SEC had an army of agents at Bernie Madoff's shop, including one who wore a jacket with the word "Enforcement" emblazoned across it, yet could not detect any fraud (an event I analyzed in my post, CuffyMeigs, Meet Bernie Madoff.)

So, if this case is weak and Goldman will litigate for years, ultimately winning or settling for some neglible amount of money, why is the SEC really bringing this case?

As my colleague astutely pointed out, this case is not about fraud. This case is a publicity stunt engineered by the Democrats to bolster their case for the upcoming financial "reform" bill being written by Sen. Dodd and others. To a public ignorant of the details of the fraud case and mired in altruism, such a case relies on a knee-jerk contempt for the "fat cats" on Wall Street and wariness of any profit seeking business.

Consequently, the politicians rely on this case to not be analyzed by the public or perhaps, even the court. The morality of altruism serves as a kind of filter which strips away facts and details leaving an emotional residue of confusion, fear and hostility. In this ideological milieu, the almost unintelligible minutia of the case serves as reaffirmation of the feeling that someone must have got screwed in some intricate, nefarious scheme.

Goldstein is always the subject of the "Two Minutes Hate," a daily, 2-minute period beginning at 11:00 AM at which a purported image of Goldstein is shown on the telescreen (a one-channel television with surveillance devices in it that can not be turned off). The reader may surmise that a political opposition to Big Brother— namely, Goldstein— was psychologically necessary in order to provide an internal enemy posing a threat to the rule of the Party; the constantly reiterated ritual of the Two Minutes Hate help ensure that popular support for and devotion towards Big Brother is continuous.

Watch the movie version of this scene here Just remember, in the movie, it is Goldstein, not Goldman.

Friday, April 16, 2010

President Barack Obama said Thursday he's amused by the anti-tax tea party protests that have been taking place around Tax Day.Obama told a fundraiser in Miami that he's cut taxes, contrary to the claims of protesters.

"You would think they'd be saying thank you," he said.

At that, many in the crowd at the Adrienne Arsht Center for the Performing Arts stood and yelled, "Thank you!"

Wednesday, April 14, 2010

In March, I delivered a speech at a fundraiser for a congressional candidate. Even though the candidate is not in my district, I have donated to his campaign because I think he is good, and the theme of my brief speech was, in essence, why I would support a candidate not in my district. I thought I would repost this speech since it is generally applicable to the Tea Party movement as a whole. Also, I encourage anyone speaking at an event to use any of the language here if you think it helps. (note: I have made some minor edits to make more applicable and since this was a private fundraiser, and I didn't ask for permission from the campaign, I just refer to him as the candidate.) HOW TO DESERVE SUCCESSI don't live in this district. So, what am I doing here and why would I support this candidate?After all, I'm not here for a special handout or favor. I don't seek to rob your earnings in order to pay my medical bills or subsidize my mortgage payments. I'm not here to ask you to bailout my business because it is too big to fail. I'm not here to try and regulate every aspect of your life, to track every penny you make and spend so that I can exact tribute through every imaginable tax. I'm not here to waste everything you have worked for including your life savings, your income, and your future income while burdening you with trillions of dollars of debt and stifling regulations.I’m here, because I wish to be left alone.

But, I’m under attack. Anyone who works for a living is under attack. Anyone who believes in personal responsibility, the right to speak his mind, own property, and to trade freely is under attack. America is under attack.So why come here tonight and support this candidate?I’m here because I recognize that the fight we have is not just with the Democrats - we know what they stand for - they stand for the dead end of welfare statism and socialism, the redistribution of wealth; they pose as defenders of civil liberties, yet, like all socialists throughout history, they seek to use the power of the state to censor and stifle their enemies; they seek to use the apparatus of the state to gain ever more power – they seek to shower this largess on their favored constituencies by throttling the productive and by crippling the entrepreneur with ever increasing taxes and regulations; there is no tactic, as we’ve witnessed lately, including subversion of the democratic process itself, that is beyond them – for them, the ends justifies the means…

Winning an intellectual battle requires the clarity that results from moral and intellectual certainty. You can not win a battle like this with unprincipled opposition and cowardly compromise. Such an approach has characterized the Republican Party for far too long and observe what it has brought: If the Democrats want to give 950 Billion dollars to the latest entitlement, the Republicans object vehemently, and counter propose 925 billion … It is the Republicans that have failed to stand on principle in defending our rights.

The nature of this debate is not the minutia of the latest 2700 page bill out of Washington. We must raise the level of the debate to more fundamental questions such as: what is the proper function of government? [We] must challenge the moral premise of the welfare state – not only its degree. Today, we are in a similar position to our Founding Fathers who did ask those questions. They too found their freedom under attack.But, unlike today’s Republicans, when the Crown imposed a stamp tax, the Founding Fathers did not settle for “repeal and replace” as Mitch McConnell recently proposed with respect to the health care bill. They sought repeal… and repeal.Just like another modern dictator, King George didn't respond to the colonist’s anger and petition for repeal. Like the present administration and Congress, the British Parliament responded with more taxes and threats, daring the colonists to defy them. Did Patrick Henry declare "give me liberty or a 2.3% reduction in the tea tax!"? He said "give me liberty or give me death!" They refused to pay any tax and famously dumped tea into the Boston Harbor. When the King responded with even more taxes and regulations in 1774, the colonists didn't merely seek a 25% reduction in the number of troops quartered per house (or in today's terms, 16,000 less IRS agents) - they rebelled.America was founded in revolution. But, this revolution was not only a military revolution. It was an intellectual and moral revolution. The Enlightenment spirit meant a culture that revered the power of the individual mind and a culture that demanded the political right for each individual to pursue his own life, liberty and happiness. Men who believe in the power of their own independent mind and seek to rely on their own judgment can not and will not be ruled.

There were many who believed we should compromise with the British – so they battled themselves as well as the British. Would they back down and settle for being half serf or would they risk their lives to assert their unalienable rights and declare independence from tyranny? Thankfully, they realized that in principle, any violation of individual liberty made them subjects to a far away king and chose to settle for nothing less than a Declaration of Independence.

Those who value the Bill of Rights, the rule of law, and constitutional protections of individual rights, understand that this battle is not only between us and the tyrants in the left wing of the Democratic Party. The battle is over how to respond. Do we compromise and try and merely slow the abrogation of our rights and the collapse of civilization as we know it - or do we fundamentally challenge the moral and political ideology of our opponents?Ask yourself this: who is more likely to win? Cowardly compromisers who “me too” every boondoggle out of Washington or unyielding, principled, consistent defenders of the rule of law, individual liberty, and free markets?

In the harsh winter of 1776, in the depths of despair, after sustaining horrendous casualties in the Battle of New York, with a demoralized rag tag army of farmers and shopkeepers, with enlistments set to expire, and with it, the American Revolution, Washington had the words of Thomas Paine read aloud to his troops - The American Crisis started with the famous words:

"These are the times that try men's souls: The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered;"

Those words were written by an English immigrant, Thomas Paine who had left his country behind in 1774 to fight for his values – America’s values. Now, I would not immigrate to this district, that is asking too much...however, I have driven down the [interstate] to deliver this speech and to tell you that it is time for us to be heard. We are losing our country, and we are losing our futures and the futures of our children.Like Paine, I believe the fight for individual freedom and limited government is not isolated to one district - it is a national movement - now is the time to fight for our freedom and the continuation of the American ideal - I will support anyone that I think is worthy of this cause – [The Tea Party] is worthy of this cause.

We do not need just another [candidate] who will go to Washington mouthing limited government rhetoric while acting to expand it. We need a new breed of American patriots who will serve the cause of liberty – passionate, articulate, and uncompromising defenders of the American spirit - of Constitutional limits on the powers of government - and of each individuals right to think, produce, and trade free from government coercion.

Joseph Addison’s play Cato: A Tragedy, about the Roman Republican who chose to die rather than live under Caesar’s dictatorship, was very popular in the American colonies and the basis of many famous quotes: Washington once quoted the following in a letter:

“Tis not in mortals to command success, but we can do better, we can deserve it.”

[Candidates who support the values of the Tea Party] deserve to win in November. And if you help get them elected around the country, you will deserve success too.

Tuesday, April 13, 2010

* When government provides public education, we tend to get illiterate students and decaying schools at increasing cost to the taxpayer.

* When the government provides public roads we tend to get frequent traffic jams on roads that, in many cases, are impassable if not downright dangerous.

* When government provides public rail service (see Amtrak), we tend to get poor service, frequent crashes, and a business that hemorrhages taxpayer money.

So, what would happen if the government were to provide free pizza or health insurance to all?

To answer, one could integrate fundamental principles in economics, politics, and morality with observations from history and contemporary society and draw an obvious generalization:

Private enterprise, driven by the profit motive and competition, will tend to produce the highest quality goods and services in abundant quantities at the cheapest possible price. On the other hand, government, which has no competition and has little or no incentive to control costs or enhance quality, will naturally tend to produce the poorest quality goods and services in the smallest possible quantity at the highest possible price.

However, modern intellectuals, paralyzed by pragmatism, would not proffer such a generalization. They would answer something like the following:

"I don't know, and no one can know. However, the idea of free pizza and health care feels good to me, so let's try something. When we observe the results of our actions, we will get back to you, and if it doesn't 'work', we will try something else to get free pizza and health care."

Facing a public still wary of his massive health care overhaul, President Obama urged Americans not to judge the nearly $1 trillion legislation he signed into law last week until the reforms take hold.

He continued: "It's been a week, folks. So, before we find out if people like health care reform, we should wait to see what happens when we put it into place. Just a thought." [emphasis mine]

Well, actually, no Obama, it is not a "thought." Such a statement represents, at best, an evasion of at least all the accumulated knowledge in economics and history.

This example provides a tidy demonstration of the epistemological disease which grips modern intellectuals and is destroying our country: the disease of pragmatism. What advocates of reason and freedom must grasp is that we are at war philosophically, not just politically - something I have blogged about extensively.

On this view [pragmatism], inquiry should not be understood as consisting of a mind passively observing the world and drawing from this ideas that if true correspond to reality, but rather as a process which initiates with a check or obstacle to successful human action, proceeds to active manipulation of the environment to test hypotheses, and issues in a re-adaptation of organism to environment that allows once again for human action to proceed.

that philosophy must be practical and that practicality consists of dispensing with all absolute principles and standards—that there is no such thing as objective reality or permanent truth—that truth is that which works, and its validity can be judged only by its consequences—that no facts can be known with certainty in advance, and anything may be tried by rule-of-thumb—that reality is not firm, but fluid and “indeterminate”...

In the whirling Heraclitean flux which is the pragmatist’s universe, there are no absolutes. There are no facts, no fixed laws of logic, no certainty, no objectivity.

There are no facts, only provisional “hypotheses” which for the moment facilitate human action. There are no fixed laws of logic, only mutable “conventions,” without any basis in reality.

In other words, belief that the health care bill will cause some outcome is merely a "provisional hypothesis." Obama is waiting for results, and then and only then will we know if it worked.

Yet, earlier, I relied on a generalization to predict that government health care will result in poorer quality, a claim already confirmed by this article, which reports that given the expected doctor shortages, nurses are expected to essentially replace doctors:

For years, nurse practitioners have been playing a bigger role in the nation's health care, especially in regions with few doctors. With 32 million more Americans gaining health insurance within a few years, the health care overhaul is putting more money into nurse-managed clinics.

Those newly insured patients will be looking for doctors and may find nurses instead.

Ayn Rand made another observation related to pragmatism that seems hyperbolic but is not. She said that the pragmatist holds that "whatever one wishes to be true, is true, whatever one wishes to exist, does exist, provided it works or makes one feel better." Now consider this fantasy offered by Obama in the earlier article:

A few weeks after passing “historic” health-care legislation, Democrats in Congress may finally be discovering what other Americans already know in their bones: this law is a horrendous mess. Some members apparently asked the Congressional Research Service (an arm of the Library of Congress that does research for members and staff) to explain to them just what will happen to their own insurance and that of their staffs as a result of the law. As the New York Times reports today, “In its painstaking analysis of the new law, the research service says the impact on Congress itself and the intent of Congress are difficult to ascertain,” but it sure does seem as though members and staff (like so many other Americans) will not be able to keep the insurance they like—despite vehement promises to the contrary by President Obama and Democratic members of Congress themselves. Pointing to a broad array of complex and contradictory provisions and a variety of “drafting errors,” the CRS concludes: “It is unclear whether members of Congress and Congressional staff who are currently participating in F.E.H.B.P. [the Federal Employees Health Benefits Program] may be able to retain this coverage.”

Monday, April 12, 2010

Dr. Mark Perry satirically offers his take on Wal-Mart's announcement that they will be cutting prices on over 10,000 items:

MP: In other words, Wal-Mart is engaging in a new round of currency manipulation by cutting its retail prices, which makes the U.S. dollar artificially overvalued in relation to Wal-Mart's goods. This attempt to manipulate the currency and lure customers into buying more of its products with an overvalued dollar will create job losses at Target and other retailers, and should be investigated by the government. If found guilty, Wal-Mart should be forced to stop manipulating the U.S. dollar, and should be pressured to raise its prices back to the pre-price cutting campaign levels.

I must emphasize that his post was satirical in case anyone from the Congress is reading.

Wednesday, April 7, 2010

I have to comment on the recent hysteria related to China's so-called "currency manipulation." Claiming that the U.S. Treasury Department "continues to drag its feet in declaring China a currency manipulator", evidently:

Senator Charles Schumer met with manufacturers in Clarence Monday about his plan to crack down on China's manipulation of its currency rates. He says such manipulation gives China an unfair advantage in international trade at the expense of US jobs.

Schumer unveiled a bill that would penalize China and other offending countries by placing tariffs on their exports and banning their companies from receiving US government contracts.

Schumer says the US Treasury Department continues to drag its feet in declaring China a currency manipulator.

For years, Schumer has been beating his mercantilist drum on China's currency peg. His argument is ridiculous for many reasons. First, as a liberal, Schumer supports statist takeovers of large swaths of the American economy yet, we are led to believe, he objects to China's currency policies, on principle, as a violation of "free trade." Second, Schumer's argument is economically false and ignores the wider context. His policies would lead to higher prices for American consumers and hurt the very people he is supposed to be claiming to help

The idea that China "manipulates" its currency is hypocritical at best. Responding to Schumer's 2005 proposal to place a tariff on China's goods, Stefan Karlsson wrote:

Had he been genuinely opposed to currency manipulation he would favor the abolition of the People’s Bank of China, the Federal Reserve and all other central banks. Any currency created by a central bank is bound to be manipulated. In fact, manipulating the currency is the task for which central banks were created for. If they didn’t manipulate the currency, there would be no reason to have a central bank.Needless to say, Senator Schumer, being a unrepentant statist, don’t favor the abolition of the Fed or call for the Chinese to do away with the People’s Bank of China. Instead he calls for the Chinese to do away with their peg to the dollar and float the yuan. According to Senator Schumer, currency pegs represent manipulation while currency floats doesn’t.

But how could it be argued that a floating fiat currency is not manipulated? First of all, the very existence of exchange rate fluctuations between different geographic areas is a manipulation as a free market monetary system -the gold standard- would not have such fluctuations based on national borders.

Today, most countries do not intervene directly in currency markets but instead, manipulate the value of currencies through control of short term interest rates. Karlsson writes:

Through its direct control of short-term interest rates as well as the strong influence on money supply and long-term interest rates this imply, central banks strongly influence exchange rates and often use that influence in a mercantilist ways. This means that even if we narrow the definition of currency manipulation to manipulation of the currency for mercantilist purposes, floating currencies are certainly manipulated.

In other words, the whole apparatus of central banking can be thought of as nothing more than a system to manipulate currencies. There is virtually no other reason for its existence.

So, if Schumer and his ilk are, at best, disingenuous about their motives for wishing to "punish" China, what are they really after? What is the economic argument behind these claims?

Ultimately, Schumer'smercantilist goal is to drive up prices of Chinese goods relative to American goods so that American exports are relatively cheaper which supposedly will support American companies and their union workers. Of course, this is all couched in "fair play" and "level playing field" rhetoric, but really, all Schumer is hoping to do is to manipulate foreign currency values in support of less efficient American manufacturers, in such a way as to get Americans to pay higher prices.

Thanks Chuck!

To understand the mechanism a little better, consider what would happen under a gold standard.

Under an actual world free banking system in which private companies issued banknotes redeemable in gold, there would be no issue (Of course, separate countries could choose to enforce the rule of law or have different legal customs, etc. but ignoring that for sake of this example) . Buying from China would, in practice, be like buying something from across the street. They would accept the bank note and could redeem it in gold or spend it on something else. It doesn't matter if they are across town, across the river, or across an ocean.

Now let's say you have a system where a country issues its own domestic currency (dollars, yuan, yen, pound, etc.), but each currency is backed by gold. Say there are 100 paper dollars in the U.S. backed by 100 oz. of gold so that the dollar is worth 1 oz. of gold. And, in China there are 100 yuan backed by 100 oz. of gold so that one yuan is worth 1 oz. of gold:

100 paper dollars, 100 oz. of gold === 1 dollar / oz.

100 paper yuan, 100 oz. of gold === 1 yuan / oz.

Exchange rate === 1 dollar / 1 yuan

Now, say the U.S. buys $50 worth of goods from China. We ship $50 to China, and they ship us some electronic toys or whatever. China now redeems its 50 paper dollars and receives a shipment of 50 oz. of gold from the U.S.:

The yuan has become more expensive in dollars. It costs you 1.5 dollars to buy a yuan, whereas before, it only cost you 1 dollar.

Consequently, under a gold standard of this kind, if one country tends to export more goods, it will begin to acquire imports of gold and its currency will appreciate. This naturally tends to make its goods more expensive and makes other countries goods less expensive. In our example, China would now find American goods cheaper, and Americans would find Chinese goods more expensive. This process tends to restore the balance of trade.

But what happens if a government controls the creation of the paper currency? Under a gold standard, if a government begins to increase its paper currency stock, what would tend to happen? Here again is the original case:

Just as before, it would appear to the Chinese that American goods are cheaper and Americans would find that Chinese goods are more expensive. To a mercantilist like Schumer, this is wonderful, because China will now tend to buy more American goods which increases exports and benefits U.S. exporters.

But, what if China maintained a policy of pegging it's currency to the U.S. dollar? For example, let's say the U.S. government creates 10 times as much money, and China follows suit:

The U.S. dollar may start to lose value against other currencies, but against the yuan, it stays "pegged." See the chart below which shows how this has actually occurred.

So, if China is "manipulating" its currency, what does Schumer label the Federal Reserve's creation of over a trillion dollars to bail out banks and keep a lid on interest rates that has the U.S. dollar falling against other currencies?

Schumer is right that if China appreciates its currency, all else equal, it would tend to make Chinese goods more expensive. But, has anyone asked why we want to make goods more expensive? If China wants to sell us stuff for really cheap, uh, shouldn't we take that deal? Essentially, Schumer is saying to China: "either make your goods more expensive to Americans or we will pass a law to directly make your goods more expensive to Americans (via tariffs)."

Following the broken window fallacy, Schumer ignores the benefit to Americans and American businesses of paying less for these goods. The money saved by not spending so much on these goods, is purchasing power that allows individuals to buy more things than otherwise. He is also ignoring the law of comparative advantage. For example, maybe Americans can produce bananas better than Central Americans (in some kind of banana making Olympics), but we are better off letting them make bananas so we can focus on what they can not do - things such as inventing and building high technology components.

To be fair, China is engaging in a policy that distorts markets but equally as much as the policies of the United States central bank. China has made a conscious decision to support their own domestic manufacturers at the expense of the purchasing power of their own citizens. Also, the domestic inflation they are creating to maintain the peg, is creating a massive bubble in their domestic real estate and stock market. But, we should care about that because...well, ask Chuck.

Karlsson proposes a great idea for the Chinese:

As we have seen with Japan, having a currency float is thus more effective if you wish to manipulate your currency for mercantilist reason. If China really wanted to nail Senator Schumer, they could just adopt Japanese strategy of having a currency float and then reduce interest rates and undertake other measures to encourage capital flight. Then the yuan would actually end up weaker than it is now, while Senator Schumer would be deprived of its argument for imposing tariffs.

If Schumer and his union masters really wish to adopt free market principles, I have a few higher priority ideas they could pursue...

Monday, April 5, 2010

For the past two years, I have discussed and analyzed my contention that Obama is a textbook example of philosophical pragmatism. If you want an almost perfect example of his mind and epistemology in action, look no further than a response he gave to a simple comment made at a recent event. According to the Washington Post,

Toward the end of a question-and-answer session with workers at an advanced battery technology manufacturer, a woman named Doris stood to ask the president whether it was a "wise decision to add more taxes to us with the health care" package.

"We are over-taxed as it is," Doris said bluntly.

Now, Doris has made a straightforward claim. Either we are over-taxed or we are not. To answer this question, in part, one would have to define or at least have a vague understanding of the proper role of government vis-a-vis the current government which would entail some moral claim on the purpose of government as it relates to the individual. From those premises, one could relatively easily and logically ascertain whether we are indeed "overtaxed."

For example, I think I could give a good answer for a principled socialist. He should answer, "if anything, you are under taxed. After all, your duty is to the common good - to your brothers, and the State. You must sacrifice everything for the benefit of the many. How dare you invoke such an outmoded, selfish, materialistic, bourgeois notion. What about those who have less than even you? From each according to ability, to each according to need..."

Although I would disagree with this philosophy in the strongest possible way, it would at least be a positive claim to some principle or idea. However, to the modern pragmatist, such an approach would be anathema. It would be too "black and white", too "extreme", too "simplistic."

So, how did Obama respond? Quoting the Washington Post:

Obama started out feisty. "Well, let's talk about that, because this is an area where there's been just a whole lot of misinformation, and I'm going to have to work hard over the next several months to clean up a lot of the misapprehensions that people have," the president said.

He then spent the next 17 minutes and 12 seconds lulling the crowd into a daze. His discursive answer - more than 2,500 words long -- wandered from topic to topic, including commentary on the deficit, pay-as-you-go rules passed by Congress, Congressional Budget Office reports on Medicare waste, COBRA coverage, the Recovery Act and Federal Medical Assistance Percentages (he referred to this last item by its inside-the-Beltway name, "F-Map"). He talked about the notion of eliminating foreign aid (not worth it, he said). He invoked Warren Buffett, earmarks and the payroll tax that funds Medicare (referring to it, in fluent Washington lingo, as "FICA").

Note the approach here. First, he expresses concern and frustration that he will need months to explain all of this. Why? Obama is unable to generalize. He can only offer a rambling litany of disconnected concretes. He is not concerned with the broader question of how this plan violates the principle of individual rights, how it violates the letter and spirit of the Constitution, nor how fundamental principles of economics could demonstrate its impracticality and destructiveness. He is not concerned with morality or cause and effect. Evidently, his mind is only filled with F-maps and CBO reports on Medicare waste.

No wonder he is frustrated. But his frustration is not moral or even political. It is epistemological. His mind, like the mind of most modern intellectuals, is wrecked. Without the ability to validly induce general concepts from observation, i.e., without the ability to reason, a man is reduced to the level of an animal. Such an approach would be like attempting to file papers without any categories.

Second, why does he advocate for anything much less socialism? As noted in previous posts, the pragmatist obtains his ideas from others, through a form of "cultural osmosis." Obama absorbs his default ideology of altruism and egalitarianism from the culture and from teachers and colleagues. He does not seek to convince Americans of the morality of altruism or the economic viability of socialism. In his mind, that is a given. His mandate is simply a matter of "getting things done" or "making it work."

Another consequence of pragmatism can be seen by observing how Obama is perceived by the media or his supporters (same thing). These people, equally disarmed by pragmatism, are unable to evaluate the plan with respect to any general principles such as the nature of rights or economic theory (see this list including video of Rep. Hare dismissing the Constitution). Consequently, they only care that Obama seems to "know what he is talking about" since he can recite minutia from the 2,700 page bill. It seems to them that he is indeed acting to "get things done" in a direction that leads towards egalitariaism and the throttling of evil profiteers.

On the other hand, says the leftist pragmatist, these pesky tea party "extremists" and other right-wing lunatics are standing in the way of progress! How could they want to stop progress?! You see, in their mind, there can be no valid reason why anyone would resist, so they must be, at best, victims of "misinformation" which Obama endeavors to rectify. However, if you still resist, even after being re-educated (not cognitively persuaded but emotionally overwhelmed) by the Dear Leader, well, there is just no hope for you. According to the left, you must be an extreme, anti-reform ideologue who engages in divisive rhetoric rather than working in a bi-partisan fashion to get things done. (In fact, such "hateful" discourse may require a "nudge" from a "choice architect" in order to realize the common goal of the "ideal citizen.")

First you lend a helping hand for a worthy cause, castigating stingy critics who claim this is the first step of a takeover. Then you ramp up the flow of subsidies creating a new dependent class. Once the dollars get big you have to enact regulations to make sure taxpayer money is spent wisely. This, of course, never happens as you begin outspending even the wildest forecasts. Hoping to control costs you introduce a public option, demonizing profiteers. Soon you are wallowing in waste and fraud, allowing you to position yourself as a reformer. Predictably, the reform is eliminating private competition altogether.

This is the time honored way to slowly overcome the distrust most citizens have when the government tries to take over large swaths of the economy.

Friday, April 2, 2010

Previously, I posted about a lecture related to high fructose corn syrup and obesity. Here is some follow up research you might find interesting, courtesy of my expert friend.

A Princeton University research team has demonstrated that all sweeteners are not equal when it comes to weight gain: Rats with access to high-fructose corn syrup gained significantly more weight than those with access to table sugar, even when their overall caloric intake was the same.

WASHINGTON - In a stunning reversal, President Obama announced that he would veto the controversial health care reform bill along with other actions to implement what he characterized as "broad, sweeping reforms" aimed at "restoring individual rights as originally conceived by the Founding Fathers of this nation."

Administration spokesman, Robert Gibbs, addressed a shocked White House press corp, tersely listing a series of immediate policy initiatives to be undertaken in the next one hundred days, the most significant of which includes an immediate moratorium on all federal spending, a long-term plan to phase out Social Security and Medicare, and the repeal of the income tax. Gibbs emphasized the administration's desire to both "cut costs and operate within the enumerated powers clause of the U.S. Constitution" by announcing the abolition of two cabinet level agencies: the Department of Education and the Department of Energy.

"It is the president's belief that education is not a legitimate function of the federal government and is an important service best left to parents and a competitive marketplace. Furthermore, after conducting a review of the Department of Energy's budget and priorities, the President decided that the billion's of dollars which will be poured into this agency is a waste of taxpayer funds serving no ostensible purpose. It should also be recognized that with this announcement, the President intends to begin a broad effort to deregulate the energy industry and unleash a vibrant and innovative new marketplace in the lifeblood of our nation's economic engine."

Perhaps the most surprising turnabout was Gibbs explanation of the administration's position that the recent economic crisis was caused by government policies. Specifically, Gibbs stated that "moral hazard created by government policies designed to encourage reckless spending coupled with the Federal Reserve systematic inflation of the money supply has created a volatile, reoccurring pattern of unsustainable asset price appreciation followed by the inevitable unwinding of misallocated capital. The only way to permanently end this boom-bust cycle is a return to sound money, fiscal responsibility, and to permanently repeal regulations and abolish government agencies that serve only to exacerbate this insidious process." Gibbs stated that the President is working with Federal Reserve officials on a plan to "transition the nation's monetary system to a private system in which banks would issue currency backed by gold and silver."

Gibbs added that the the policy initiatives were only instances of a more important principle that would be driving the administration's policies going forward.

"This administration sees the role of the executive branch and the role of the federal government more broadly as a protector of the sacred rights of the individual to life, liberty and the pursuit of happiness. The state must be restored to its proper, limited function as proscribed in the Constitution -consistent with the founding moral and legal philosophy of this nation."

Democratic Party insiders and congressmen on the hill were left speechless in the wake of these announcements. "I have to admit, we are all a little stunned right now" said Majority Leader Nancy Pelosi. "We will be meeting with the administration later today to better understand their legislative priorities for the rest of this session." Seeking to stake out political high ground in November, Republican minority leader Senator Mitch McConnell stated "while we applaud the President's efforts at moving toward fiscal responsibility, we are concerned about the proposed cuts in Social Security and Medicare."

Yeah, I know you knew this was an April Fools post about 2.5 milliseconds in.

Quote of the Month

“We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” -- Ayn Rand